Oil price drops amid hopes of US-Iran peace deal

AI desk brief

Oil prices fell sharply on hopes of a US-Iran ceasefire/peace deal, with Brent down 1.3% to $91.54 and WTI down 1.4% to $87.64, as markets priced out some of the recent stagflation risk. Brent is now nearing a 17% decline from the start of May, while WTI is about 7% below this week’s peak of $94.70. The move followed reports that Trump circulated a draft agreement and that the US and Iran had reached a tentative 60-day extension of the ceasefire, though officials stressed no final deal was in place. Deutsche Bank’s Henry Allen said markets were showing “mounting optimism about an end to the conflict,” with lower oil prices helping drive a broad rally as investors reduced expectations for higher inflation and slower growth. For precious metals, the immediate setup is mixed: lower inflation expectations and firmer risk appetite can cap defensive demand, but the drop in US 10-year yields to 4.45% is supportive for bullion through lower real-rate pressure. Near term, gold’s direction likely hinges on whether this geopolitical de-escalation continues to unwind the oil shock, or whether any setback in talks revives inflation and safe-haven buying.